1 IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF VIRGINIA Alexandria Division MICROSTRATEGY SERVICES CORP., ) ) ) Plaintiff, ) ) v. ) 1:14cv1244 (JCC/IDD) ) OPENRISK, LLC, ) ) ) Defendant. ) M E M O R A N D U M O P I N I O N This matter is before the Court on MicroStrategy Services Corp.’s (“MicroStrategy”) Motion to Dismiss the Amended Counterclaims. [Dkt. 39.] For the following reasons, the Court will grant in part and deny in part the motion. I. Background In September of 2011, MicroStrategy, which provides cloud-based computing services, and OpenRisk, LLC (“OpenRisk”), a software start-up developing a platform to estimate damages to real property caused by natural disasters, entered into a contract. In exchange for payment, MicroStrategy would provide two terabytes of data storage and set up a cloud environment subject to specifications set forth in confidential, proprietary OpenRisk software architecture which OpenRisk shared with MicroStrategy. (Am. CounterCl. [Dkt. 35] ¶¶ 1, 5-6.) The Case 1:14-cv-01244-JCC-IDD Document 67 Filed 03/17/15 Page 1 of 22 PageID# 920
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IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF VIRGINIA
Alexandria Division
MICROSTRATEGY SERVICES CORP., )
)
) Plaintiff, )
) v. ) 1:14cv1244 (JCC/IDD)
) OPENRISK, LLC, )
)
) Defendant. )
M E M O R A N D U M O P I N I O N
This matter is before the Court on MicroStrategy
Services Corp.’s (“MicroStrategy”) Motion to Dismiss the Amended
Counterclaims. [Dkt. 39.] For the following reasons, the Court
will grant in part and deny in part the motion.
I. Background
In September of 2011, MicroStrategy, which provides
cloud-based computing services, and OpenRisk, LLC (“OpenRisk”),
a software start-up developing a platform to estimate damages to
real property caused by natural disasters, entered into a
contract. In exchange for payment, MicroStrategy would provide
two terabytes of data storage and set up a cloud environment
subject to specifications set forth in confidential, proprietary
OpenRisk software architecture which OpenRisk shared with
MicroStrategy. (Am. CounterCl. [Dkt. 35] ¶¶ 1, 5-6.) The
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contract had a term of five years but permitted MicroStrategy to
terminate the contract for OpenRisk’s failure to pay fees. (Id.
¶ 6.)
At about the same time it entered into the
MicroStrategy contract, OpenRisk was introduced to a potential
investor, Marc Roston (“Roston”). (Id. ¶ 8.) Roston offered
$200,000 for a controlling interest in OpenRisk. (Id.)
Believing the offer was too low, OpenRisk rejected it. (Id.)
According to the Amended Counterclaims, after OpenRisk turned
down his offer, Roston conspired with three officers of the
company (collectively referred to as the “former officers”) to
leave the company in October of 2011 so as to force OpenRisk to
accept Roston’s offer. (Id. ¶ 9.) He also conspired with the
former officers to steal OpenRisk’s intellectual property and
confidential and proprietary business information.1 (Id. ¶ 10.)
Roston and the former officers formed a new company, Spectant
Group LLC (“Spectant”), allegedly to carry out this plan. (Id.)
MicroStrategy purportedly joined this conspiracy, facilitating
the transfer of OpenRisk’s information from its cloud
environment to Spectrant, secretly accepting payments from
1 A shareholder derivative suit brought against the former officers has been pending in Massachusetts state court since November of 2011. (MicroStrategy’s Mem. in Supp. [Dkt. 40] at 3.)
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Roston and the former officers (collectively “co-conspirators”)2
to be credited to OpenRisk’s account without its knowledge, and
secretly working with the co-conspirators to continue developing
the OpenRisk platform after the former officers had left the
company. (Id. ¶ 11.) OpenRisk alleges that MicroStrategy
continued in this conspiracy even after it received a cease and
desist letter in December of 2011 advising MicroStrategy that
the former officers had failed to return OpenRisk property.
(Id. ¶ 101.) At the time it sent this letter, OpenRisk was
unaware that MicroStrategy had transferred its data to
Spectrant, nor was it even aware that Spectrant existed or the
scope of work undertaken by the co-conspirators. (Id. ¶ 101.)
In November of 2011, OpenRisk notified MicroStrategy
that it was no longer a going concern and asked it to
discontinue services to OpenRisk. (Compl. [Dkt. 1] ¶¶ 19-20.)
OpenRisk missed its first quarterly payment of $63,000. (Id. ¶
21.) MicroStrategy notified OpenRisk that it was in material
breach of the contract and that the contract would be
automatically terminated if payment was not received within
thirty days. (Id. ¶ 22.) OpenRisk did not make this or any
future payment. (Id. ¶ 23.)
2 The Amended Counterclaim also alleges that Roston’s companies MNR Capital and Arcvandam, and “others” are also conspirators, but those parties are not relevant for the purpose of this analysis. (Am. Countercl. ¶ 21.)
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OpenRisk originally sued MicroStrategy in state court
in Massachusetts in June 2014. (Am. Countercl. ¶ 14.)
MicroStrategy moved to dismiss the case, citing the forum
selection clause in the contract. (Id.) Meanwhile,
MicroStrategy filed this one-count breach of contract action in
September of 2014. (Compl. ¶¶ 25-30.) In November of 2014, the
Massachusetts court granted the motion to dismiss, contingent
upon OpenRisk filing a counterclaim in this action or
instituting a separate suit in Virginia state court. (Am.
Countercl. ¶ 17.) The court’s order prohibited MicroStrategy
from raising the statute of limitations as a defense to any of
the claims asserted in the Massachusetts action. (Id.)
Before filing an answer, OpenRisk challenged this
Court’s subject matter jurisdiction, arguing that the amount-in-
controversy requirement had not been satisfied. (OpenRisk’s
Mem. in Supp. of Mot. to Dismiss for Lack of Jurisdiction [Dkt.
11] at 1.) The Court3 denied the motion. (11/14 Hr’g Tr. [Dkt.
19] at 16 (“[S]ubject matter jurisdiction can be addressed at
any point, even after judgment; and so if as further evidence is
developed it appears as a matter of certainty that you cannot
reach the threshold amount, then it’s perfectly appropriate for
the defense to raise the issue anew[.]”).)
3 This case was assigned to this Court after the hearing on the motion to dismiss. (See 1/9/15 Order [Dkt. 31].)
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OpenRisk filed several counterclaims and then amended
them,4 asserting the following claims: aiding and abetting breach
of fiduciary duties (“Count I”), business conspiracy in
violation of Virginia Code §§ 18.2-499 – 500 (“Count II”),
common law conspiracy (“Count III”), tortious interference with
contract (“Count IV”), and misappropriation of trade secrets in
violation of Virginia Code § 59.1-336 (“Count V”). (Am.
Countercl. ¶¶ 104-132.) MicroStrategy has moved to dismiss all
five of the counterclaims. (MicroStrategy’s Mot. to Dismiss
[Dk.t 39].) Having been fully briefed and argued, this motion
is ripe for disposition.
II. Legal Standard
“A motion to dismiss under Rule 12(b)(6) tests the
sufficiency of a complaint[.]” Republican Party of N.C. v.
The Supreme Court has stated that in order “[t]o survive a
motion to dismiss, a [c]omplaint must contain sufficient factual
matter, accepted as true, to ‘state a claim to relief that is
4 OpenRisk originally sued MicroStrategy in state court in Massachusetts in June 2014. (Am. Countercl. ¶ 14.) MicroStrategy moved to dismiss the case, citing the forum selection clause in the contract. (Id.) The Massachusetts court granted the motion to dismiss, contingent upon OpenRisk filing a counterclaim in this action or instituting a separate suit in Virginia state court. (Id. ¶ 17.) The court’s order prohibited MicroStrategy from raising the statute of limitations as a defense to any of the claims asserted in the Massachusetts action. (Id.)
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plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678
(2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570
(2007)). “A claim has facial plausibility when the pleaded
factual content allows the court to draw the reasonable
inference that the defendant is liable for the misconduct
alleged.” Id. The issue in resolving such a motion is not
whether the non-movant will ultimately prevail, but whether the
non-movant is entitled to offer evidence to support his or her
claims.
“Determining whether a complaint states a plausible
claim for relief [is] . . . a context-specific task that
requires the reviewing court to draw on its judicial experience
and common sense.” Iqbal, 556 U.S. at 679 (citations omitted).
To survive a motion to dismiss, a plaintiff’s complaint must
demand more than “an unadorned, the-defendant-unlawfully-harmed-
me accusation.” Iqbal, 556 U.S. at 678; Twombly, 550 U.S. at
555. Legal conclusions couched as factual allegations are not
sufficient. Twombly, 550 U.S. at 555. Hence, a pleading that
offers only “formulaic recitation of the elements of a cause of
action will not do.” Iqbal, 556 U.S. at 678; Twombly, 550 U.S.
at 557. Nor will a complaint that tenders mere “naked
assertion[s]” devoid of “further factual enhancement.” Iqbal,
556 U.S. at 678; Twombly, 550 U.S. at 557.
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Moreover, the plaintiff does not have to show a
likelihood of success on the merits. Rather, the complaint must
merely allege – directly or indirectly – each element of a
“viable legal theory.” Twombly, 550 U.S. at 562-63.
III. Analysis5
A. Count I – Aiding and Abetting Breach of Fiduciary Duty
MicroStrategy moves to dismiss Count I of the Amended
Counterclaim primarily on the basis that aiding and abetting a
tort is not an independent cause of action recognized in
Virginia. (MicroStrategy’s Mem. in Supp. [Dkt. 40] at 11.)
OpenRisk cites to Halifax Corp. v. Wachovia Bank as
support for the proposition that it may assert such a cause of
action. In that case, the Supreme Court of Virginia merely
adopted the trial court's reasoning and assumed, for purposes of
analysis, that Virginia recognized such a cause of action.6 604
S.E.2d 403, 411-12 (Va. 2004). Therefore, the Halifax court
did not address whether such a tort exists. This Court declined
5 Pursuant to a choice-of-law provision in the parties’ contract, Virginia law governs this case. (See MicroStrategy’s Mem. in Supp. [Dkt. 40], Ex. A, at 6 (“This agreement and our relationship under it shall be interpreted under and governed by the laws of the Commonwealth of Virginia . . . without regard to the choice or conflicts of law provision of any jurisdiction.”).) 6 In Halifax, the Court determined that if aider and abettor liability for a breach of fiduciary duty did exist in Virginia, the Plaintiffs' claims failed as it had failed to plead (1) actual knowledge of the underlying fiduciary duty and (2) actual knowledge of the breach of that fiduciary duty by the primary tortfeasor. Halifax, 604 S.E.2d at 412-14.
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to create such a cause of action and dismissed a claim identical
to the one here for aiding and abetting a breach of fiduciary
duty. Calderon v. Aurora Loan Serv., Inc., 1:10CV129, 2010 WL
2306343, at *6 (E.D. Va. June 3, 2010) (citing Tysons Toyota,
Inc. v. Commonwealth Life Ins., et al, No. 94638, 1990 WL
10039336, at *1 (Fairfax Cir. Ct. Aug. 9, 1990) (holding that “a
defendant who aids and abets in the commission of a tort may be
jointly liable for the tort and is not liable for a separate
tort of aiding and abetting.”)). Therefore, Count I will be
dismissed.7
MicroStrategy also challenges whether Count I is
timely. Though in its opposition OpenRisk argued that aiding
and abetting a breach has a five-year statute of limitations
(OpenRisk’s Opp. at 9), OpenRisk agreed at the motions hearing
the claim is actually subject to the two-year residual
limitations period set forth in Virginia Code § 8.01-248. See
cases and stating that a breach of fiduciary duty claim “is
personal in nature because it springs from the duty to deal
7 OpenRisk cites to AvalonBay Cmtys., Inc. v. Willden as recognizing such a cause of action in Virginia. No. 1:08cv777, 2009 WL 2431571, at *11 (E.D. Va. Aug. 7, 2009). That case predates this Court’s analysis in Calderon. While AvalonBay has not been expressly overruled, its reading of Halifax overlooked the Supreme Court of Virginia’s equivocal language about such a cause of action. See id. (citing Halifax, 604 S.E.2d at 413-14). Accordingly, this Court declines to apply AvalonBay’s reasoning.
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honestly and fairly with fiduciaries”); Broyhill v. Bank of Am.,
(applying Singer to find breach of fiduciary duty claim barred
by the statute of limitations). OpenRisk asserts that it is
improper for MicroStrategy to assert a statute of limitations
defense since it represented to the Massachusetts court that it
would not assert such a defense against “substantially similar
claims” that were filed as counterclaims in this action.
(MicroStrategy’s Mem. in Supp., Ex. D, at 12.)8
The only aiding and abetting claim in the
Massachusetts action was that of misappropriating trade secrets
and other confidential information. (MicroStrategy’s Mem. in
Supp., Ex. D, at 4-5.) OpenRisk asserted that MicroStrategy
facilitated the misappropriation of trade secrets and
confidential and proprietary business information by allowing
the co-conspirators continued access to the OpenRisk cloud
environment. (MicroStrategy’s Mem. in Supp., Ex. C, at 41.)
Here, the aiding and abetting claim alleges that MicroStrategy
affirmatively participated in the breach of the former officers’
fiduciary duties, which presumably include the alleged
8 The Court may consider the court’s order and the pleadings in the Massachusetts action because the counterclaims incorporate them by reference. See Philips v. Pitt Cnty. Mem’l Hosp., 572 F.3d 176, 180 (4th Cir. 2009) (stating that on a motion to dismiss, the court may consider documents attached to the complaint and those attached to the motion to dismiss, so long as they are integral to the complaint and authentic).
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disclosure of trade secrets and confidential and proprietary
information. (Countercl. ¶¶ 104-109.) Though the legal theory
is different, the factual underpinnings of the claims are the
same, and there is no separate cause of action for aiding and
abetting misappropriation of trade secrets in this action.
Therefore, the Court declines to consider the statute of
limitations defense, as it appears the claims are “substantially
similar.” Nonetheless, Count I must be dismissed for the
reasons stated earlier.9
B. Counts II and III – Conspiracy Counts
To establish the statutory business conspiracy claim
alleged in Count II, OpenRisk must plead that two or more
persons acted together for the purpose of willfully and
maliciously injuring another in his reputation, trade, business
or profession. Va. Code. Ann. § 18.2-499 - 500. In order to
plead a case for common law conspiracy, which is Count III of
the Amended Counterclaims, OpenRisk must plead (1) two or more
persons acting in concert; (2) for some unlawful purpose or for
some lawful purpose by unlawful means; and (3) resulting
damages. The Country Vinter, Inc. v. Latour, 634 S.E.2d 745,
9 As a third argument in support of dismissal of Count I, MicroStrategy argues that the claim is either preempted by the Virginia Uniform Trade Secrets Act (“VUTSA”) or does not allege any fiduciary breach. (MicroStrategy’s Mem. in Supp. at 11-14.) In light of its earlier ruling, the Court need not reach this argument.
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751 (Va. 2006). MicroStrategy raises three independently
sufficient grounds in support of its motion to dismiss these
plain language of the preemption provision indicates that the
[VUTSA] was intended to prevent inconsistent theories of relief
for the same underlying harm by eliminating theories of common
law recovery which are premised on the misappropriation of a
trade secret.”)). The Court denied the motion to dismiss
alternative tort claims pled in Stone Castle because it could
not be established at that point in the litigation that the
confidential information at issue was, in fact, a trade secret.
Id.; cf. S & S Computers & Design, Inc. v. Paycom Billing
Servs., Inc., No. CIV.A.500CV00058, 2001 WL 515260, at *3 (W.D.
Va. Apr. 5, 2001) (holding that VUTSA displaced a claim for
breach of fiduciary duty where the claim was based on
misappropriation of a trade secret and finding that plaintiff
alleged sufficient facts that, if proven, would establish the
information as a trade secret).
Since Stone Castle was decided, other courts have had
occasion to consider whether the preemption provision of the
Uniform Act encompasses confidential business information. Some
courts, like the Wisconsin Supreme Court, found that state’s
preemption language10 “excepts from the class of unaffected
10 The language of the preemption provision in Wisconsin’s Uniform Trade Secret Act is identical to that in the Virginia Act. Compare Va. Code Ann. § 59.1-341 to Wis. Stat. § 134.90(6).
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remedies only those remedies based on the misappropriation of a
statutorily-defined trade secret. It leaves available all other
remaining civil remedies for the protection of confidential
information.” Burbank Grease Servs., LLC v. Sokolowski, 717
N.W.2d 781, 789 (Wis. 2006). To hold otherwise would require
the court to rewrite the statute to read: “Any civil remedy not
based upon misappropriation of a trade secret and not based on
confidential business information.” Id. at 790 (emphasis in
original).
Other courts have reached a contrary result.
Illustrative of these cases is BlueEarth Biofuels, LLC v.
Hawaiian Elec. Co.11 In BlueEarth, the Supreme Court of Hawaii
determined that the Hawaii Uniform Trade Secrets Act (“HUTSA”)
displaces non-contract civil claims based on the alleged
acquisition, disclosure, or use of confidential information that
does not rise to the level of a statutorily-defined trade
secret. 235 P.3d 310, 325 (Haw. 2010). Therefore, it was not
necessary to determine whether the information was a trade
secret before addressing preemption under the HUTSA. Id. In
reaching its decision, the court ultimately joined the “majority
of courts” in holding that the HUTSA’s preemption provision
abolishes alternative, free-standing causes of action for theft
11 HUTSA’s preemption provision is identical to that in the VUTSA. Compare Va. Code Ann. § 59.1-341 to Haw. Rev. Stat. § 482B-8.
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or misuse of confidential or proprietary information. Id. at
322. Such an interpretation, the court stated, promotes uniform
interpretation of the Uniform Act and gives teeth to the